We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Ameren Corporation (NYSE:AEE) and determine whether hedge funds skillfully traded this stock.
Ameren Corporation (NYSE:AEE) investors should be aware of a decrease in hedge fund interest of late. Ameren Corporation (NYSE:AEE) was in 19 hedge funds' portfolios at the end of June. The all time high for this statistics is 32. Our calculations also showed that AEE isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
To most market participants, hedge funds are seen as slow, outdated investment vehicles of yesteryear. While there are over 8000 funds in operation at the moment, Our researchers choose to focus on the masters of this group, about 850 funds. Most estimates calculate that this group of people watch over the majority of the smart money's total asset base, and by monitoring their top picks, Insider Monkey has discovered several investment strategies that have historically defeated Mr. Market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Phillip Gross of Adage Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind we're going to analyze the fresh hedge fund action regarding Ameren Corporation (NYSE:AEE).
How are hedge funds trading Ameren Corporation (NYSE:AEE)?
At the end of June, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in AEE a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Ameren Corporation (NYSE:AEE), which was worth $230.4 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $81.2 million worth of shares. D E Shaw, Citadel Investment Group, and Adage Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Wexford Capital allocated the biggest weight to Ameren Corporation (NYSE:AEE), around 2.7% of its 13F portfolio. Caxton Associates LP is also relatively very bullish on the stock, earmarking 0.87 percent of its 13F equity portfolio to AEE.
Due to the fact that Ameren Corporation (NYSE:AEE) has faced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there were a few funds that elected to cut their full holdings last quarter. At the top of the heap, Zach Schreiber's Point State Capital said goodbye to the biggest investment of the "upper crust" of funds monitored by Insider Monkey, worth about $19 million in stock. Stuart J. Zimmer's fund, Zimmer Partners, also cut its stock, about $15.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to Ameren Corporation (NYSE:AEE). These stocks are Interactive Brokers Group, Inc. (NASDAQ:IBKR), Coca-Cola European Partners plc (NYSE:CCEP), Conagra Brands, Inc. (NYSE:CAG), iQIYI, Inc. (NASDAQ:IQ), Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), Cheniere Energy Partners LP (NYSE:CQP), and Teleflex Incorporated (NYSE:TFX). All of these stocks' market caps are similar to AEE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IBKR,32,695740,10 CCEP,27,464657,5 CAG,35,614220,5 IQ,17,1283437,-11 ALNY,38,982898,4 CQP,3,9442,0 TFX,28,651313,-4 Average,25.7,671672,1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.7 hedge funds with bullish positions and the average amount invested in these stocks was $672 million. That figure was $474 million in AEE's case. Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 3 bullish hedge fund positions. Ameren Corporation (NYSE:AEE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AEE is 43.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. A small number of hedge funds were also right about betting on AEE as the stock returned 13.1% in the third quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.